It’s the last trading day of the month, and futures are slightly lower, but overall, it’s been a solid month of gains. Month to date the S&P is up over 4% and the TSX is up 3.3%. Stocks in Europe slipped and markets in Asia were mixed as tensions between the U.S. and China continue to simmer. U.S. consumer spending data for April came out this morning worse than expected as well. Compensation of employees paid out by businesses also collapsed. It fell 7.9% from a year earlier the most in 60 years of data.
Given the decent gains this week, it’s not surprising to see equity investors ending the week on a cautious note as we wait for Trump’s announcement on China. Trump looks set to sign a measure that would punish Chinese officials for imprisoning Muslims in internment camps and he's also looking to rebuke Beijing over its crackdown in Hong Kong.
Geopolitical tensions aren’t the only ones grabbing headlines. Tensions withing the U.S. are also elevated as Minneapolis burns
. On a third night of anger at the killing of George Floyd, protesters set several buildings alight, including a police station.
The war of tweets continues. Twitter hid a tweet from President Donald Trump this morning
, accusing him of breaking its rules by “glorifying violence” in a message that said looters at protests in Minneapolis would be shot. This decision is sure to rile up the President, given his previous temper tantrum and executive order to remove a layer of legal protection for social media networks. Going after twitter seems a little to us like shooting yourself in the foot just before the big (presidential) race.
Bonds are up slightly but yields remain locked in their tight 6-week range. Canadian shorter-term yields remain locked to the low end of their range, still well below March levels. While the longer end (30 years) continues to fade the bounce off the March lows. Since mid-April, longer-term bond yields have gradually been grinding lower in Canada, while U.S. long bond yields have risen in May.
Interestingly, despite weaker markets this morning, the U.S. dollar is seeing broad based weakness on the worse than expected data prints. Euro’s appear to be the winner outperforming all majors except for their northern partners in crime (Norway, Sweden).
Jerome Powell is set to address yield-curve control and other ammo still available to the Fed when he takes part in a virtual discussion with former Vice Chairman Alan Blinder today. The latest weekly balance sheet update also showed the Fed’s ETF holdings increased to $2.98 billion, up from $1.8 billion last week
. The emergency lending program was designed to provide a backstop to large corporate borrowers amid the pandemic. Diversion
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